101 Powerful Tips for Legally Improving Your Credit Score

Lesson 2: The Best Ways to Boost Your Credit Score

Because of the way credit scores are calculated, some actions you take will affect your credit score better than others. In general, paying your bills on time and meeting your financial responsibilities will boost your score the most. Owing a reasonable amount of money and being able to repay it will show lenders that you take your finances seriously and pose little threat of lost money. There are a few tips that, more than any other, will boost your credit score the most:


Tip # 4: Pay your bills on time.


One of the best ways to improve your credit score is simply to pay your bills on time. This is absurdly simple but it works very well because nothing shows lenders that you take debts seriously as much as a history of paying promptly. Every lender wants to be paid in full and on time.


If you pay all your bills on time then the odds are good that you will make the payments on a new debt on time, too, and that is certainly something every lender wants to see. Experts think that up to 35% of your credit score is based on your paying of bills on time, so this simple step is one of the easiest ways to boost your credit score.


Paying your bills on time also ensures that you don’t get hit with late fees and other financial penalties that make paying your bills off harder. Paying your bills in a timely way makes it easier to keep making payments on time.
Of course, if you have had problems making your payments on time in the past, your current credit score will reflect this. It will take a number of months of repaying your bills on time to improve your credit score again, but the effort will be well worth it when your credit risk rating rebounds!


Tip #5: Avoid excessive credit.


If you have many lines of credit or several huge debts, you make a worse credit risk because you are close to “overextending your credit.” This simply means that you may be taking on more credit than you can comfortably pay off. Even if you are making payments regularly now on existing bills, lenders know that you will have a harder time paying off your bills if your debt load grows too much.


The higher your debts the greater your monthly debt payments and so the higher the risk that you will eventually be able to repay your debts. Plus, statistical studies have shown that those with high debt loads have the hardest time financially when faced with a crisis such as a divorce, unemployment, or sudden illness.


Lenders (and credit bureaus who calculate your credit score) know that the more debt you have the greater problems you will have in case you do run into a life crisis.


In order to have a great credit score, avoid taking out excessive credit. You should stick to one or two credit cards and one or two other major debts (car loan, mortgage) in order to have the best credit rating. Do not apply for every new credit line or credit card “just in case.” Borrow only when you need it and make sure to make payments on your debts on time.


You should also know that taking out lots of new credit accounts in a relatively short period of time will cause your credit score to nosedive because it will look as though you are being financially irresponsible.


Tip #6: Pay Down Your Debts


If you have a lot of debt, your credit score will suffer. Paying down your debts to a minimum will help elevate your credit score. For example, if you have a $1000 limit on your credit card and you regularly carry a balance of $900, you will be a less attractive credit risk to lenders than someone who has the same credit card but carries a smaller balance of $100 or so. If you are serious about improving your credit score, then start with the largest debt you have and start paying it down so that you are using a less large percentage of your credit total.


In general, try to make sure that you use no more than 50% of your credit. That means that if your credit card has a limit of $5000, make sure that you pay it down to at least $2500 and work at carrying no larger balance. If possible, reduce the debt even more. If you can pay off your credit card in full each month, that is even better. What counts here is what percentage of your total credit limit you are using - the lower the better.


Tip #7: Have a range of credit types.


The types of credit you have are a factor in calculating your credit score. In general, lenders like to see that you are able to handle a range of credit types well. Having some form of personal credit - such as credit cards - and some larger types of credit - such as a mortgage or auto loan - and paying them off regularly is better than having only one type of credit.


Keep Your Credit Score Safe


If you have a lower credit score that you would like, odds are that the score is caused by some small financial mistake or oversight you have made in the past. Not every person with bad credit has a low credit score caused by something they did, though. Sometimes, other people’s criminal activity can affect your credit score. There are a few tips that can keep you and your credit safe from online and financial predators:


Tip #8: Look out for identity theft.


Many people who are careful about paying bills on time and having minimal debts are shocked each year to find that they have low credit scores. In many cases, this happens as a result of identity theft. Identity theft is a type of crime in which people take your personal information and steal that information to pose as you in order to get access to your accounts or identity.


For example, someone with your PIN numbers can remove small amounts of money from your bank account each month or someone can use your name and personal information to get credit cards in your name and use those credit cards with no intention of paying back the money. You are stuck with the large debts and the poor credit score.


To prevent identity theft, always check your account statements carefully each month. Report any suspicious activity or any charges you don’t recognize at once. Also, check your credit report regularly and immediately investigate any new credit accounts you do not recognize - this is the best way of detecting and acting on identity theft.


If you have been the victim of identity theft, report to the police at once and get a police statement. Send copies of this to your bank and credit bureaus. Better yet, get the credit bureaus to attach the report to your credit report if you can. Close all your accounts and reopen new ones. You should not have to pay for someone else’s illegal activity.


Tip #9: Practice safe banking, safe computing, and safe business practices.


To stay safe from identity theft, always follow safe banking and financial practices:


1) Keep account numbers and PIN numbers safe. Cover your account and PIN numbers when using debit at the store and refuse to give your PIN number to anyone. Avoid writing down your PIN and account numbers - you never know when this information could fall into the wrong hands.


2) Only do business with businesses you trust.


3)If you get applications for credit cards in the mail that are “pre-approved” rip up the applications and enclosed letters before discarding them. No, this is not paranoid. Identity thieves sometimes go through garbage in order to find these forms so that they can fill them out and steal your identity.


4) If you use a computer, install good firewall and antivirus protection system and update it religiously. Better yet, take a course in safe computing at your local college or community center. You will learn many good tips for keeping all your information safe while you are online.


5) Never buy anything online from a company you do not trust of from a company that does not have encryption technology and a good privacy policy.


6) Even with all computer precautions, avoid providing private information through email or your computer. Be especially cautious if you get an email from your bank asking you to verify your information by clicking on a link - this is a popular scam that comes not from your bank but from criminals posing as your bank. Ignore the email and phone your bank about the message.


7) Be wary of unsolicited emails, phone calls, or mail advertisements. Most are from legitimate companies but there are companies who promise you a credit card over the telephone only to charge your existing credit card without sending you anything.


Similarly, letters will sometimes promise you specific items or services. Once you send in your credit card information (usually to a post office box) you hear no more from the company. If you need or want to buy something from a company, be sure to check the company’s standing with the Better Business Bureau first.


Send a money order instead of a check (which had your account number) or your credit card information. If you do use a credit card, report any unusual charges or any payments you made for a product that did not arrive at the credit card company.


In some cases, they can stop payment or refund your money as well as take steps to keep your credit card number safe.


8) Be wary of offers that seem too good to be true. If you get an offer for a ten million dollar check - for which you need to put down $5000 as a “sign if good faith”...if you get an offer for a free state-of-the-art computer - if only you provide your account information... take a deep breath and consider before sending in your money and your information.


Offers that are too good to be true always are. Scam artists often rely on your belief in others and your trust to make money. They depend on the fact that you will be so excited about a product or service that you will throw good judgment out the window. Prove them wrong.


When faced with an offer that seems too good to be true, do some research on the web, through the Better Business Bureau, or ask the person making the offer some questions. Never take someone up on an offer that you have been given unsolicited unless the company and the offer both check out.


9) Read the fine print. Some services or companies will have the tiny print in their contract or agreement that allows them to charge you extra hidden fees or that allows them to retract certain offers. If you get an offer through email or the mail, make it a habit of reading the fine print.


10) Be alert for a sudden disruption in your mail service. If you do not get mail for some time, contact your post office and ask whether your address was recently submitted for a “change of address” service. It sounds strange, but it’s true.


One way that criminals steal identities is to change your address at the local post office. They redirect your mail to a post office box number and steal your mail looking for personal information such as bank statements, pre-approved credit card applications, and other pieces of mail they can use to steal your identity.


They use this information to pose as you with lenders and run up huge charges in your name. Simply keeping an eye out on your mail can help you keep your credit score safe.


Tip #10: Check your credit score regularly


You are more likely to notice problems and inconsistencies if you check your credit score on a regular basis - at least once a year and preferably three times a year. Be sure to check your credit rating with each credit bureau, too. If you notice anything odd or anything you don’t recognize (such as a charge account you did not open) report it immediately.


Sometimes, these errors are caused by mistakes made by the credit bureau, but they could be an indication that someone is using your identity. In either case, such mistakes could hurt your credit score. Fixing such errors improves your credit score.


If you think you have been the victim of identity theft, take action at once:


1) Contact the three major credit bureaus and ask to speak to the fraud department. Explain that you have been the victim of identity theft (or believe you may have been) and ask that an “alert” be placed on your file. This will let anyone looking at your report know that you may have been the victim of fraud. It will also mean that you will be alerted any time a lender asks to look at your file - each time a lender does look at your file, it may be an indication that the identity thieves are trying to open a new account in your name.


When the lender sees that the person applying is not you, they will deny the thieves credit and in most cases the criminals will stop trying to access your identity. Most alerts on your file last 90 or 180 days but you can extend this period to several years by asking the credit agencies for an extension of the “fraud alert” in writing.


In some states, you can even ask for a freeze to be placed on your credit score and credit report which will prevent anyone but yourself and those creditors you already have from accessing your file. Any lenders the thieves contact to set up a new account will be refused access and the thieves will not be able to get any more money in your name.
You are entitled to a free copy of your credit report if you have been the victim of identity theft. Be sure to take advantage of this offer so that you can check exactly how your credit has been affected. Dispute those items that are not yours.


2) Call the Federal Trade Commission (FTC) at 1-877-438-4338. This is the special hotline that the FTC has set up to help customers deal with fraud and identity theft. You will be able to get up-to-date information about your rights and advice as to what you can do to improve your credit score and keep in safe in the future.


3) Contact the police. Identity theft is a crime and you need to file a police report (be sure to keep a copy of this report) so that you can help the police potentially catch the criminals responsible. Contacting the police will also give you a paper trail and proof that a crime has been committed. Keeping a paper trail of the crime and your response will make it easier for you to repair your credit if it has been damaged by identity thieves.


4) Contact your creditors or any creditors that the identity thieves have opened an account with. Ask to speak to the security department and explain your predicament. You may need to have your accounts closed or at least your passwords changed to protect yourself.


You may also need to fill out a fraud affidavit to state that a crime has been committed - be sure to keep a copy of this form for your records. The security team of the creditors should be able to advise you as to what you can do. Be sure to note down who you contacted and when so that you have records of the steps you have taken to deal with the crime.


If you have been the victim of identity theft and you are deeply in debt to creditors you never contacted, you will not be held responsible for the charges - but you will have to prove that you have been the victim of identity theft, which is tricky since the thieves are using your name and claiming to be you.


It is a frustrating experience because lenders will want to be paid and you will want to avoid paying for charges you did not run up. Being persistent and keeping good proof that you have been the victim of a crime will help to clear your credit score. In the meantime, however, you will be faced with a much lower credit rating than you deserve and you may have to put off larger purchases that may require a loan.

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Lesson 1: The Basics (Prev Lesson)
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